An option pool refers to a portion of a company's shares or equity that is reserved for future distribution to employees, consultants, or other individuals as part of their compensation or incentive plans.
The individuals who may receive shares from the option pool include:
Why is an Option Pool important?
Having an option pool is crucial for startups and growing companies as it allows them to attract and retain talented individuals by offering them a stake in the company's success. By allocating a portion of the company's shares or equity to an option pool, the company can grant stock options or other equity-based incentives to employees and consultants.
How does an Option Pool work?
When creating an option pool, a company sets aside a specific number or percentage of its shares or equity. These shares are then reserved for future issuance to eligible individuals. The size of the option pool is typically determined by factors such as the company's stage of growth, industry norms, and the anticipated need for employee incentives.
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